I am 60 years old and have received substantial funds on my retirement. I wish to take a small exposure to equity. Which fund should I invest in so as to get returns on the equity portion while keeping the debt portion safe? Should I invest in equity linked savings scheme (ELSS)?

One way for you to get some equity exposure as well as save tax is to invest in ELSS and to invest the bulk of your corpus in growth schemes of appropriate debt mutual funds. Remember, at comparable safety levels, growth schemes of debt mutual funds score over bank fixed deposits because of the favourable tax treatment.In bank fixed deposit, the entire interest is taxed in the same year whereas in a growth scheme the interest is taxed only to the extent actually withdrawn. When you withdraw any amount from a debt scheme (growth option), proportional amounts are reduced from both the principal and accrued interest portion and tax is payable only on the interest portion actually withdrawn. This considerably reduces the tax burden in earlier years and postpones the tax burden to later years. As the tax rate is much lower for withdrawals made after the debt fund has been held for at least 3 years, this can turn into a very substantial benefit without sacrificing safety or liquidity.Another option for you is to invest in senior citizen saving scheme to the extent of Rs 1.50 lakhs. You can obtain the equity exposure you require by going in for hybrid funds that invest a smaller proportion of their corpus in equity (normally between 10- 30%) and the bulk of their investment is in debt securities. These kind of funds are called monthly income plans (or MIPs) in market parlance, though no monthly income is guaranteed nor is it desirable to invest in a dividend option of such schemes. They have the same tax treatment as debt funds but provide a dash of equity exposure.A better option are the slew of funds known as equity savings funds where a similar proportion (10% to 30%) is invested in equity, 30-40 % in debt securities and the balance in completely hedged equity products. The completely hedged equity portion delivers a fixed low return and the overall return from such an equity saving fund is probably lower than a comparable MIP fund. However, it scores over MIPs because of its tax treatment as an equity fund. This kind of funds have become quite popular in the last few years. This can definitely be an option that you can consider for a part of your corpus.To get proper advise I would urge you to consider taking professional guidance from a Sebi registered investment advisor regarding your investments.

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Harsh Roongta is a CA and Sebi-registered investment advisor. Send your queries to personalfinance@dnaindia.net or tweet them to @AskHarshdna